SA launches state mining company

The launch of state-owned mining company is renewing questions about whether South Africa has long-term plans to nationalise the lucrative industry.

President Jacob Zuma officially launches the company this weekend at a coal mine in eastern South Africa. The mining ministry says the company, known as the African Exploration Mining and Finance Corporation, will initially focus on ensuring the state-owned electricity utility has enough coal.

“What is worrying for mining investors is, where does it go from here?” said Alison Turner, a Panmure Gordon analyst.
“Is this just a small step to a much broader transfer ... to state ownership?”

Mining minister Susan Shabangu and other top officials have made it clear they oppose nationalisation. But Shabangu says that while nationalisation is not government policy, ANC is studying its feasibility.

“Government’s commitment to free market is beyond doubt,” Shabangu told investors recently. “But our commitment to the betterment of the society is also beyond reproach. It goes without saying that a balance has to be found between pursuing the principles of free market with taking into account the needs of the country.”

Decision on gold
A final decision on nationalisation has been put off until the party’s 2012 annual convention. In the meantime, some speculate the push to get a state-owned mining company running is an attempt to defuse support for broader nationalisation.

“If that’s the case, it would be quite a relief,” Turner said. “But we won’t know for sure until at least 2012.”

Iraj Abedian, a South African economist who has advised the mining ministry, said South Africa isn’t the only mining power trying to determine how best to ensure its natural resources benefit as many people as possible. He said similar debates are going on in Latin America and Australia.

In South Africa, the legacy of apartheid ensured the mining bosses were white and the workers black. Seventeen years after the end of apartheid, the government is under increasing pressure to improve the lives of the impoverished black majority.

Mining has accounted for an average of 7,7% of South Africa’s gross domestic product over the last decade, according to the Chamber of Mines.

“African governments cannot rely only on taxes and let private business own the enterprises,” said Mothibi Mosimanegape, an economic analyst in neighbouring Botswana, where the government partners with private miners. “They should get as much as possible out of the mining activity itself. This revenue can then be used to develop the nation.”

Abedian said the future of South Africa’s African Exploration Mining and Finance Corporation is as uncertain as whether nationalisation will be adopted. He said the company was meant to help private companies, not compete with them. It could, for instance, back entrepreneurs willing to explore adding value to South Africa’s mineral resources before exporting them, an area Abedian said private companies have shied from.

Many point to neighbouring Botswana as a model of how the state can play a role in the mining industry.

Esther Kanaimba, spokesperson for Botswana’s Debswana, stresses that “we are not a state mining company”, but an equal partnership between the government and the private giant De Beers.

“The government does not play any role in the day-to-day running of the company,” Kanaimba said. - Sapa-AP